20060915Comments.pdf

CECELIA A. GASSNER
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
BAR NO. 6977
RECEIVED
200& SEP I 5 PM \: 35
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UTIUTIE;;:; COMiIi IUi'~
Street Address for Express Mail:
472 W. WASHINGTON
BOISE, IDAHO 83702-5983
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION TO
SELL THE ALGOMA WATER SYSTEM
CERTIFICATE OF PUBLIC CONVENIENCEAND NECESSITY NO. 396
CASE NO. AWS-O6-
COMMENTS OF THE
COMMISSION STAFF
The Staff of the Idaho Public Utilities Commission (Commission), by and through its
Attorney of record, Cecelia A. Gassner, Deputy Attorney General, in response to the Notice of
Application and Notice of Modified Procedure in Order No. 30075 issued on June 16 2006 and
Minute Order issued on August 2, 2006, submits the following comments.
BACKGROUND
On May 18, 2006, Algoma Water System ("Algoma ) filed an Application with the
Commission seeking approval of the amendment of its Certificate of Public Convenience and
Necessity (CPCN) No. 396 to reflect a change in ownership. Algoma states that the ownership
of the business has transferred to Mr. Paul Greenwood. The Application states that the new
owner does not intend to ask for a change in rates and charges for services at this time.
The utility provides water service to 27 customers (20 residential and 7 commercial) in
Bonner County, Idaho. The current tariff on file with the Commission sets the rates for Algoma
at $17.59 per month for residential customers, and $28.15 per month for commercial customers.
STAFF COMMENTS SEPTEMBER 15 , 2006
Mr. Greenwood intends to operate the water system as a proprietorship and under the assumed
business name of Algoma Water. The Application is solely for the purpose of approving the
change in ownership and the issuance of a Certificate of Public Convenience and Necessity in
the new owner s name.
STAFF ANALYSIS
Finance
Staff has reviewed Algoma s Application requesting approval to sell the water system
assets to Paul Greenwood.Mr. Greenwood has a business background in real estate
development and business management. He owns a landscaping business in California and three
(3) sewer systems in Bonner County, Idaho.He presented to the Commission a personal
financial statement indicating a net worth that represent sufficient financial strength to support
the ownership of the water system. Although the sewer companies he owns are not publicly
regulated by the Commission, these systems are similar in enough respects to indicate that he has
experience in operating a utility.
The water system (physical plant) under the ownership of Larry Neu, the previous owner
had no rate base recorded on the annual reports and therefore none of the rates reflect a return on
any capital investment. Additionally, Larry Neu acknowledged that all improvements to the
water system that were made during the period of time he owned the system were accounted for
as repairs (expenses) and not as capital improvements. The new owner has acknowledged that
he will not claim any of the purchase price as rate base at this time or in any future rate case.
Therefore, the purchase price of the assets purchased by Mr. Greenwood as recorded on the
Company s books will not be included in rate base or earn a return, and as such will not be
recoverable from customers in rates.
Mr. Greenwood agreed that the operation of the water company will not include any
sharing of expenses or overhead costs with any of his other business operations. He also agreed
that the accounting for the water system would be separated from the accounting for any other
business so that the expenses of operating the water system would be easily identifiable.
The 2005 Annual Report for Algoma reported a long-term debt to Panhandle State Bank
in the amount of $32 305.90. According to Company s responses to Staffs production requests
this long-term debt will be paid in full from the purchase proceeds and Mr. Greenwood does not
STAFF COMMENTS SEPTEMBER 15 , 2006
intend to incur any other debt that would be secured by the assets of the water system as he
begins the operation of the utility,
Emdneerin2:
Staff contacted the Idaho Department of Environmental Quality (DEQ) to ensure that
Algoma is in compliance with DEQ regulations. DEQ informed Staff that the system is
substantially in compliance, except that the system had no certified operator at the time of
discussions between Staff and DEQ. DEQ requires that each system have a certified operator.
Algoma has since demonstrated to Staff that Robert Hansen, a State-certified operator of Water
Systems Management, Inc., has been hired to manage the system. Therefore, with a certified
operator Algoma will be able to satisfy that requirement of the State. Mr. Hansen s company
also provides 24-hour emergency response for maintenance needs.Staff is convinced that
overall service ofthe Company is likely to improve due to the operational employment of Water
Systems Management, Inc.
Additionally, DEQ conducted a Public Water System Enhanced Sanitary Survey for
Algoma on July 22 2005. In its report, DEQ indicated nine system deficiencies. Staff has been
informed by DEQ that all but one of the deficiencies is to be resolved by September 29, 2006.
The only remaining deficiency requires the Company to develop a system for annual inspections
of back flow prevention devices, which is to be implemented by December 29 2006.
Algoma s system is currently non-metered. The previous owners of the Company had
indicated interest in metering in the past. However, no meters have been installed to date. Staff
addressed metering with the Company, which explained that there are no future plans for meter
installation.
Consumer Relations
A Notice to Algoma s customers was filed with its Application. The Notice was mailed
to customers as required by the Utility Customer Relations Rules (IDAPA 31.21.02102). The
original Notice mailed to customers with their April billing notice reflected an incorrect
Commission mailing address. Staff brought this to the attention of the Company. A corrected
notice was to be sent out but the Company has not provided Staff with a mailing date.
The Commission has received one inquiry and one complaint from January 2003 until
September II , 2006. The inquiry was asking for the name and address of then new owner Chris
Neu.The Commission has received no complaints regarding customer service or billing
practices during the time Mr. Neu owned the Company. In September 2006, a complaint was
STAFF COMMENTS SEPTEMBER 15 , 2006
filed regarding the difficulty in contacting the billing agent for Algoma. The only phone number
listed on consumer bills and notices is for Deal Pump & Electric. It should be made clear on all
customer notices and billing statements that customers should contact Deal Pump & Electric for
emergency repairs and to call the Company s bookkeeper for billing questions and to make
payment arrangements. Further, as neither phone number will answer as "Algoma Water
customers need to be made aware of whom they are calling.
A review of Algoma s recently revised forms, notices and billing statement show the
Company has taken the necessary steps to change their forms and come into compliance with
almost all the Utility Customer Relations Rules (IDAPA 31.21.01000 et seq.) and Utility
customer information Rules (IDAPA 31.21.02000 et seq.
).
Some changes, however, still need to
be made to the customer notices and billing statement.
The Billing Statement does not reflect a payment due date. The due date should allow
for at least fifteen days after the billing date. An Invoice Statement mailed with the Billing
Statement includes a business term for payment due of "Net 15." Customers may not understand
that terminology. Therefore, Staff recommends that the statement be revised to clearly reflect
due dates.
The "Initial Notice" which provides customers with 7 days to contact the Company to
avoid disconnection, cannot include payment demand of past due sewer charges to avoid
disconnection of water service. The listing of the phone number for an Emergency Contact set
forth on the notice should inform customers they are calling Deal Pump & Electric, and not
Algoma. Customers should be provided with the phone number for Algoma Water
bookkeeper, who also handles any billing issues.
The "Final Notice" has the phone number for an emergency contact rather than the
bookkeeper, who is the only one authorized to make payment arrangements and discuss billing
questions. Her contact information should be clearly stated on the notice. The amount stated for
payment to avoid disconnection may not include any past due amount for sewer. The current
example of a billing statement that was provided to Staff does not make it clear to customers that
Algoma is not threatening disconnection of water for sewer charges that are past due to Northern
Utilities Sewer (a separate business of the owner that serves the same customer base). The
notice to customers of the possibility of disconnection because of overdue water charges should
not contain any reference to sewer charges that may also be due and owing by the customer.
STAFF COMMENTS SEPTEMBER 15, 2006
Lastly, the "Summary of Rules for Customers of Small Water Companies" document
should reflect the phone numbers for company contacts identical to those used in other customer
notices. This document is the annual notice provided to customers of the tariff in place and rules
of which customers should be aware, and is a key information piece to let customers know how
to contact the company in the event of issues or concerns. The contact information for billing
issues and repair needs is imperative and should be clearly stated on this document.
STAFF RECOMMENDATION
The Staff recommends that the Commission approve the transfer of the Certificate of
Public Convenience and Necessity for Algoma to Mr. Paul Greenwood. The Staff further
recommends that Algoma be directed to revise its billing statements to address the concerns set
forth above in Staffs comments.
Respectfully submitted this ~ay of September 2006.
Cecelia A. G ssner
Deputy Attorney General
Technical Staff:Joe Leckie
Harry Hall
Mike Darrington
Tammy Estberg
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STAFF COMMENTS SEPTEMBER 15, 2006
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS 15TH DAY OF SEPTEMBER 2006
SERVED THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN
CASE NO. AWS-06-, BY MAILING A COpy THEREOF, POSTAGE PREPAID
TO THE FOLLOWING:
LARRY NEU
C/O TOMLINSON BLACK
200 MAIN ST
SANDPOINT, ID 83864
PAUL E GREENWOOD
22311 ROMAR ST
CHATS WORTH CA 91311
SECRET AR
CERTIFICATE OF SERVICE